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CCP Workplan: end of the beginning for recovery and resolution

On 22 September 2015, the all-stars of international standard-setting bodies released the 2015 CCP Workplan (dated 15 April 2015), along with a Progress Report.

The Workplan was presented to the FSB Steering Committee by the Chairs of the FSB Standing Committee on Supervisory and Regulatory Cooperation, the FSB Resolution Steering Group, the Committee on Payments and Market Infrastructures, the International Organization of Securities Commissions and the Basel Committee on Banking Supervision.

The agreed Workplan identifies substantive priorities where certain bodies will focus on CCP resilience, CCP recovery planning and CCP resolvability.

CCP resilience will be owned by CPMI-IOSCO, with regular interactions with the FSB Standing Committee on Supervisory and Regulatory Cooperation. Loss absorption capacity and liquidity, implementation of CPMI-IOSCO Principles for Financial Market Infrastructures (PFMI) and stress testing policies all fall under this category.

CCP recovery work will be led by CPMI-IOSCO, this time working in close cooperation with the FSB Resolution Steering Group.  This stream will focus on existing CCP recovery mechanisms, loss allocation tools, default waterfalls and perhaps additional guidance on the requirements for recovery planning set out in the PFMI.

CCP resolvability will be under the responsibility of the FSB Resolution Steering Group, working in close cooperation with CPMI-IOSCO. The results of a survey completed in June 2015 indicated that resolution frameworks are not well developed. A further working group (Cross-border Crisis Management Group for FMIs, the fmiCBCM) should provide a forum for authorities to discuss and agree on resolution measures.

A joint BCBS, FSB and IOSCO study group was established in July 2015 to analyse interdependencies between CCPs and major clearing members and any resulting systemic implications.

The complexity of the task at hand indeed compels all these bodies to chip in, as their prescience will be paramount to understanding the rewired world created post-2008 where all roads now lead to CCPs.

The Workplan marks the end of the beginning for CCPs. By mid-2016, a report will be published for public consultation on resilience and recovery issues, followed by a final report on interdependencies by October 2016 and further guidance on resolvability by end-2016.

Meanwhile, market participants might cross fingers and hope for the best when picking their CCP.

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